Trusts, Estates and Succession

You filed your taxes and are entitled to a refund, but you haven’t received the refund yet.  What should you do?

The best way to check the status of a refund is to use the Where’s My Refund? tool on IRS.gov. This tool gives access to your tax return and refund status anytime. All that is needed is internet access and three pieces of information:

• Social Security number
• Filing status on the return
• The exact whole dollar amount of the refund

You can start checking on the status of your return within 24 hours after the IRS has received the e-filed return, or four weeks after a paper return has been mailed. Where’s My Refund? includes a tracker that displays progress through three stages: the IRS receives the tax return, then approves the refund, and sends the refund.

Where’s My Refund? updates once a day, so there’s no need to check more often.

Generally, the IRS issues most refunds in less than 21 days, but some may take longer. IRS phone and walk-in representatives can research the status of refunds only if it’s been 21 days or more since a taxpayer filed electronically, or more than six weeks since they mailed a paper return. You can also contact the IRS if Where’s My Refund? directs you to do so.

Your taxes are prepared, you have received the unfortunate news that you owe taxes, BUT you are not able to pay your taxes in full.  What should you do?

This year, more so than any other previous years, the IRS anticipates that most taxpayers will be affected by major tax law changes. While many will get a tax refund, others will find that they owe taxes.  If you find yourself in this situation, you may qualify for a waiver of the estimated tax penalty that normally would apply. See Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and its instructions for details.

“The IRS understands there were many changes that affected people last year, and the new penalty waiver will help taxpayers who inadvertently had too little tax withheld,” said IRS Commissioner Chuck Rettig. “We encourage people to check their withholding again this year to make sure they have the right amount of tax withheld for 2019.”

Regardless of whether you get a refund, owe taxes, or break even, you should file your return by April 15.  Even if you owe and cannot pay in full, you can avoid a late filing penalty.   Should you find yourself in this situation, you should pay what you can and consider a payment plan for the remaining balance.

Below is a reprint from an IRS blast on payment options:

Taxpayers who owe taxes can choose among the following payment options:

• IRS Direct Pay allows payment directly from a checking or savings account. This service is free.
• Electronic Federal Tax Payment System, or EFTPS. Pay by phone or online. This service is free.
• Debit or credit card payment. This service is free, but the processing company may charge a fee. Fees vary by company.
• Check or money order made payable to the United States Treasury (or U.S. Treasury) either in person or through the mail.
• Cash payments at some IRS offices or at a participating PayNearMe location. Some restrictions apply. Taxpayers should not send cash through the mail.

Taxpayers who are unable to pay their taxes in full should act quickly. Several payment options are available including:

• Online Payment Agreement — Individuals who owe $50,000 or less in combined income tax, penalties and interest and businesses that owe $25,000 or less in payroll tax and have filed all tax returns may qualify for an Online Payment Agreement. Most taxpayers qualify for this option, and an agreement can usually be set up in a matter of minutes. Online applications to establish tax payment plans, like online payment agreements and installment agreements, are available Monday – Friday, 6 a.m. to 12:30 a.m.; Saturday, 6 a.m. to 10 p.m.; Sunday, 6 p.m. to midnight. All times are Eastern time.
• Installment Agreement — Installment agreements paid by direct deposit from a bank account or a payroll deduction will help taxpayers avoid default on their agreements. It also reduces the burden of mailing payments and saves postage costs. Even taxpayers who don’t qualify for a payment agreement may still pay by installment. Certain fees apply.
• Delaying Collection — If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves.
• Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool.

In addition, taxpayers can consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law.

Check tax withholding

The IRS urges all taxpayers to check their withholding for 2019, especially those who made withholding adjustments in 2018 or had a major life change. Those most at risk of having too little tax withheld from their pay include taxpayers who itemized in the past but now take the increased standard deduction as well as two-wage-earner households, employees with non-wage sources of income and those with complex tax situations.

To help taxpayers allocate the appropriate withholding to their paychecks throughout the year in 2019, an updated version of the agency’s online Withholding Calculator is now available on IRS.gov. It’s never too early to check your withholding. While it’s a good idea any year, starting early in 2019 is particularly important as most tax filers adjust to the revised tax rates, deductions and credits.

Online tools

The IRS urges taxpayers to take advantage of the many tools and other resources available on IRS.gov. Taxpayers have a variety of options to get help filing and preparing their tax returns on IRS.gov, the official IRS website. Taxpayers can also find answers to their tax questions and resolve tax issues online. The Let Us Help You page answers most tax questions, and Publication 5136, IRS Services Guide, links to these and other IRS services.

Taxpayers can go to IRS.gov/account to securely access information about their federal tax account. They can view the amount they owe, pay online or set up an online payment agreement; access their tax records online; review the past 18 months of payment history; and view key tax return information for the current year as filed. Visit IRS.gov/secureaccess to review the required identity authentication process.

Your taxes are prepared and OUCH – you owe.  Were you aware that there are several payment options available where taxpayers can pay immediately or arrange to pay in installments? Taxpayers can pay online, by phone, or with their mobile device and the IRS2Go app. Taxpayers should pay in full whenever possible to avoid interest and penalty charges.

Here are some electronic payment options offered by the IRS for taxpayers:

• Electronic Funds Withdrawal. Taxpayers can pay using their bank account when e-filing. EFW is free and only available through e-File.
• Direct Pay. Taxpayers can pay directly from a checking or savings account for free with IRS Direct Pay. Instant confirmation is received after a payment is submitted. With Direct Pay, payments can be scheduled up to 30 days in advance. Changes or cancellations of payments can be made two business days before the scheduled payment date. Taxpayers can choose to receive email notifications each time they make a payment.
• Credit or debit cards. Taxpayers can also pay their taxes by debit or credit card online, by phone, or with a mobile device. Card payment processing fees vary by service provider and no part of the service fee goes to the IRS. Telephone numbers for service providers are at IRS.gov/payments.
• Pay with cash. Taxpayers can make a cash payment at a participating retail partner. Taxpayers can do this at more than 7,000 locations nationwide. Taxpayers can visit IRS.gov/paywithcash for instructions on how to pay with cash.
• Installment agreement. Taxpayers who are unable to pay their tax debt immediately may be able to make monthly payments. Before applying for any payment agreement, taxpayers must file all required tax returns.  We will discuss this next week.

Anyone wishing to use a mobile device should remember they can access the IRS2Go app to pay with either Direct Pay or by debit or credit card. IRS2Go is the official mobile app of the IRS and is available for download from Google Play, the Apple App Store or the Amazon App Store.

Taxpayers can also visit IRS.gov/account and log in to their account. From here, they can view their taxes owed, payment history, federal tax records, and key information from their most recent tax return as originally filed.

PLEASE NOTE:  The options offered by the IRS may not be available at the state level.  You should check your state’s taxation website for further information on payment options.

Tax season is in full swing and you may find a need to contact the Internal Revenue Service about your filing.  If so, you will be asked to verify your identity when calling.

So, what will be needed to verify your identity?  Here is list of information which may be needed:

• Social Security numbers and birth dates for those who were named on the tax return
• Filing status – single, head of household, married filing joint or married filing separate
• The prior-year tax return. Telephone assistors may need to verify taxpayer identity with information from the return before answering certain questions such as the amount on a particular line of the return
• A copy of the tax return in question
• Any IRS letters or notices received by the taxpayer

If a third-party calls the IRS on your behalf, the IRS will only speak to the legally designated representative.  A parent cannot call on behalf of their adult child nor can a child call on behalf of a parent unless proper documentation is signed.  A Power of Attorney prepared by an attorney most likely will not be sufficient in these cases.  Here are the items needed to speak to the IRS on behalf of another taxpayer:

• Verbal or written authorization from the third-party to discuss the account
• The ability to verify the taxpayer’s name, SSN/ITIN, tax period, and tax form(s) filed
• Preparer Tax Identification Number (PTIN) or PIN if a third-party designee
• A current, completed and signed Form 8821, Tax Information Authorization or
• A completed and signed Form 2848, Power of Attorney and Declaration of Representative

If a tax professional is calling about a third party’s account, they should be prepared to verify their identities and provide information about the third party they are representing. The IRS will ask for a Form 2848 (above) before proceeding to discuss the taxpayer’s account.

Questions regarding a deceased taxpayer require different steps. Be prepared to fax:

• The deceased taxpayer’s death certificate, and
• Either copies of Letters Testamentary approved by the court, or IRS Form 56, Notice Concerning Fiduciary Relationship (for estate executors)

Finally, don’t forget that visiting IRS.gov may help to answer questions you may have.  Try searching the Interactive Tax Assistant, Tax Topics, Frequently Asked Questions, Tax Trails and the IRS Tax Map to get faster answers.

A couple of weeks ago we talked about resources to help in preparing your return.  If you haven’t prepared your return, here are a few additional tips from the IRS to help you choose a preparer:

• Check the Preparer’s Qualifications. People can use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool helps taxpayers find a tax return preparer with specific qualifications. The directory is a searchable and sortable listing of preparers.
• Check the Preparer’s History. Taxpayers can ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, people can check with the State Board of Accountancy. For attorneys, they can check with the State Bar Association. For Enrolled Agents, taxpayers can go to verify enrolled agent status page on IRS.gov or check the directory.
• Ask about Service Fees. People should avoid preparers who base fees on a percentage of the refund or who boast bigger refunds than their competition. When asking about a preparer’s services and fees, don’t give them tax documents, Social Security numbers or other information.
• Ask to E-File. Taxpayers should make sure their preparer offers IRS e-file. The quickest way for taxpayers to get their refund is to electronically file their federal tax return and use direct deposit.
• Make Sure the Preparer is Available. Taxpayers may want to contact their preparer after this year’s April 15 due date. People should avoid fly-by-night preparers.
• Provide Records and Receipts. Good preparers will ask to see a taxpayer’s records and receipts. They’ll ask questions to figure things like the total income, tax deductions and credits.
• Never Sign a Blank Return. Taxpayers should not use a tax preparer who asks them to sign a blank tax form.
• Review Before Signing. Before signing a tax return, the taxpayer should review it. They should ask questions if something is not clear. Taxpayers should feel comfortable with the accuracy of their return before they sign it. They should also make sure that their refund goes directly to them – not to the preparer’s bank account. The taxpayer should review the routing and bank account number on the completed return. The preparer should give you a copy of the completed tax return.
• Ensure the Preparer Signs and Includes Their PTIN. All paid tax preparers must have a Preparer Tax Identification Number. By law, paid preparers must sign returns and include their PTIN.
• Report Abusive Tax Preparers to the IRS. Most tax return preparers are honest and provide great service to their clients. However, some preparers are dishonest. People can report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their return without the taxpayer’s consent, they should file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit.

For over a year we have been hearing about the December 2017 Tax reform legislation.  But, how does it affect you?

The IRS has attempted to provide resources to enable you to find answers to your questions by visiting IRS.gov.  Here is a reprint from an IRS blast that lists several of the resources that will help taxpayers find out how this law affects them:

Tax reform provisions that affect individuals
This is the main tax reform page with information for individual taxpayers. It includes dozens of links to more information on topics from withholding and tax credits to deductions and savings plans.

Tax reform basics for individuals and families
This publication provides information to help individual taxpayers understand the Tax Cuts and Jobs Act and how to comply with federal tax return filing requirements.

Tax reform resources
On this page, taxpayers can find helpful products including news releases, tax reform tax tips, revenue procedures, fact sheets, FAQs and drop-in articles.

Steps to take now to get a jump on next year’s taxes
This page has dozens of resources and tools that people can visit now or any time before they file their 2018 tax returns.

Paycheck Checkup
This page has information for people doing a Paycheck Checkup to see if they’re withholding the right amount of tax from their paychecks. Taxpayers can perform a Paycheck Checkup at the beginning of 2019 to make sure their withholding is correct for the rest of the year.

IRS Withholding Calculator
One way taxpayers can do a Paycheck Checkup is to use the Withholding Calculator. Checking withholding can help taxpayers protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time.

Taxpayer Advocate
The Taxpayer Advocate Service’s Tax Reform Changes website, available in English and Spanish, explains what is changing and what is not this year for individuals. Its interactive information can be reviewed by tax topic or line by line using a Form 1040 example and is updated to show the new 2018 Form 1040 references.

Tax reform
The main tax reform webpage on IRS.gov features information for individuals, but also takes users directly to info for people who are self-employed. It is also a great resource for anyone who does taxes or accounting for a business or charity.

We are now beyond February 15 when income tax information was to have been sent out.  If you haven’t already prepared your return, here are some tips to help ease the process:

• Did you know that there is an IRS webpage called the Get Ready page that includes steps to take. Check it out on IRS.gov.
• Have you always been a paper filer of your returns? This year might be the year to consider e-filing.  Not computer friendly?  There are several options available:
  • Free tax preparation is available through various resources:
    • IRS Free File services is available on IRS.gov or through the IRS2Go mobile app which will allow you to prepare your taxes on a tablet or smartphone. If your income is less than $66,000, you can prepare your return on IRS Free File.
    • Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA and TCE) programs are available nationwide for taxpayers who earn $55,000 or less. This program is mainly for people age 60 or older and focuses on tax issues unique to seniors.  If you wish to find the closest VITA site, visit IRS.gov and search for “VITA” or call 800-906-9887.  AARP participates in the TCE program and you can find information at aarp.org or by calling 888-227-7669.
  • Paid professionals include enrolled agents, certified public accountants and attorneys as well as other preparers without a professional credential. All paid tax preparers must have a Preparer Tax Identification Number or a PTIN and must sign the returns including their PTIN.  The IRS has a page on IRS.gov called Choosing a Tax Professional page has information about tax preparer credentials and qualifications to help you vet a preparer.

Good luck in preparing your taxes.